Although Syria is maintaining its general commitment to pursue a peace accord, Syrian President Hafez Assad is demanding terms that Israel cannot accept, Saguy told the government ministers.

Syrian-Israeli negotiations have been stalled by Syrian demands that Israel agree to a full withdrawal from the Golan Heights before Syria spells out its terms for peace.

Saguy’s assessment came as U.S. Secretary of State Warren Christopher was preparing to head to the region to help jump-start the stalled talks. Christopher is due to arrive in Israel on March 9.

In assessing Israel’s overall security situation, Saguy said there is a low probability that Israel will be involved in a war this year.

Saguy devoted some of the briefing to Iran, which he said is still trying to build up its nuclear potential. He said the Islamic republic may be able to acquire a nuclear capability within three years if it is able to buy nuclear components abroad.

As for the Palestinians, Saguy and other intelligence officials told the Cabinet that Palestine Liberation Organization leader Yasser Arafat has been doing more to curb terrorism, but it is not enough.

The officials said Islamic fundamentalist terror is still a threat to Israelis.

Despite obstacles Israel and the palestinians have encountered in their ongoing negotiations for extending Palestinian self-rule to the West Bank, the officials said Arafat has no better alternative but to continue with the peace process.

The issue of terror came to the fore again Saturday night, when Israeli and Palestinian security officials came under fire near the Jewish settlement of Netzarim in the Gaza Strip.

According to Israeli officials, the Israeli and Palestinian security teams were fired upon by unknown assailants from the cover of a nearby orchard. Israeli and Palestinian forces returned the fire. Usama al-Borno, 41, a Palestinian school principal who was driving his car near the junction guarded by the two groups, was caught in the crossfire and killed.

Hundreds of Palestinians attended Borno’s funeral on Sunday amid threats from the Islamic Jihad that Israel would pay for his death. The militant fundamentalist group claimed responsibility in the past for a series of terror attacks against Israelis.

It is not clear whose bullets killed Borno and Israeli officials promised an investigation to clear up the confusion surrounding the shooting.

Meanwhile, Israel Television reported that Arafat had requested a meeting with Foreign Minister Shimon Peres this week to help set up a summit with Prime Minister Yitzhak Rabin to discuss the state of Israeli-Palestinian negotiations.

The request comes in the wake of a warning by Peres that Israel could suspend the negotiations if Arafat does not crack down on terror.

“If he is too weak to do that, or lacks the will, why should we negotiate with him at all,” Peres said in an interview with the German weekly Der Spiegel.

Meanwhile, Rabin has decided to further ease the closure on the west Bank and Gaza Strip, which was imposed following the Jan. 22 double suicide bombing near Netanya.

He authorized 3,000 more permits to be issued to married agricultural and industrial workers, aged 30 and over. This brings to 18,000 the number of permits issued, compared to 30,000 before the bombing, in which 21 Israelis were killed. (correct figure?)

News reports also said Arafat has offered to act as a mediator between Israel and Iraq.

Arafat, who met with Iraqi President Saddam Hussein last week, said Baghdad is interested in establishing peace with Israel.